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Does Applying for a Credit Card Hurt Your Credit?

Last updated 03/15/2024 by

Benjamin Locke

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Applying for a new credit card does indeed affect your credit, but the results can be a mixed bag. Although a hard pull on your credit application could temporarilyhurtn your credit score, credit diversification and a lower credit utilization rate can ultimately increase it. Credit cards are just a portion of your overall credit profile and should be used in conjunction with other strategies to help maintain strong credit scores.
In the hyper-consumerist environment of modern America, you can wear a good credit score as a badge of honor. Hopefully, everyone is aware that your credit is sparkling, and if not, you can slip it into your conversation at dinner parties. What could be more artful than asking for the potatoes to be passed your way while mentioning that your credit score is solidly in the 790s? On the flip side, if you have a bad credit score, you might want that enveloped in secrecy. While building good credit, you must have laser focus and understand what helps or hinders your credit.
If you plan to add another credit card to your wallet, you’ll want to carefully consider how applying for a new credit card affects your credit score, both positively and negatively.

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What makes up a credit score (FICO)?

There are two major credit scores: a FICO score and a Vantage score. As FICO is both older and more popular than Vantage, we will focus primarily on what makes up a FICO score. According to FICO, there are five elements that make up a credit score. These five elements are payment history, money owed, new credit, length of credit history (age), and types/diversity of credit. The chart below explains the breakdown.

How does a new credit card affect my score?

When you apply for a new credit card, you have an effect on your own credit metrics that lenders and the three major credit bureaus use to calculate the score. In the short run, a new application for a credit card can have a negative effect on your credit score. The hard credit pulls when applying, as well as its effect on your credit history length, can lessen your credit score in the immediate term.
However, if you want to build your credit in the long term, there are some significant advantages. Andrew Latham, CFP, likens it to a gym workout. You suffer at first, but in the long run, it’s helpful. “Picture it like lifting weights at the gym — the initial strain on your muscles may cause some discomfort, but with consistent and responsible effort, it ultimately leads to strength and growth as long as you keep good form. Understanding the balance between these two aspects and being strategic with your credit card applications is key to maintaining and improving your credit profile in the long run.”

Negative impacts in the short run

Applying for a new credit card can have these effects in the short term.

A hard pull drops the credit score

Effect on score: New credit
Maybe you have heard the terms “hard pull” or “soft pull” before and don’t know what they mean. With a soft pull, a lender or credit card company reviews your basic credit score and credit report. A hard pull or hard inquiry, on the other hand, happens when a lender officially requests an inquiry into your credit. This will have a negative effect on your credit score, and will be included in your FICO score within 12 months of the application.

The average age of credit is lower

Effect on score: Length of credit history
Length of credit history is a part of your overall credit profile when calculating your score. The major credit bureaus will typically count this as 15% of your overall score. When you open up a new line of credit, this is factored into your “average age” of credit accounts. In essence, your credit age gets lowered once you are granted a new credit card.

Your credit profile is too credit card focused

Effect on score: Credit diversity
When lenders and credit bureaus are doing due diligence, they like to see a diverse mix of debt and credit. For instance, maybe a person has debt credit in the form of two credit cards, a mortgage, and a student loan. Interest rates on a mortgage or auto loan will almost always be significantly lower than credit cards and will be packaged differently. For instance, a mortgage has an asset (house) backing the loan, as well as the individual’s credit. If you just keep applying for new credit cards with no other forms of debt and credit, this can have a negative impact on your credit score.

Positive impacts in the long run

Although applying for a new credit card can indeed cause some short-term pain, for those looking at building credit over the long term, it can be very beneficial. Here is how applying for a new credit card and using it can positively impact your credit in the long run.

Credit utilization ratio

Effect on score: Amounts owed, payment history
A credit utilization ratio is the percentage of overall credit available to you that you actually use. If you add a new credit card, your overall credit limit and credit available to you will increase. Therefore, if you get a new card and don’t use any credit on the new card, then your overall percentage of credit utilization should decrease. You can see how this works below.
Existing credit card #1$5,000
Existing credit card #2$5,000
Credit used$3,500
Utilization rate35%
Existing credit card #1$5,000
Existing credit card #2$5,000
New credit card$5,000
Credit used$3,500
Utilization rate23%
The utilization ratio drops from 35% to 23% as the new credit card has made more credit available but the amount of money owed stays the same. Credit bureaus and credit card issuers like to see a low credit utilization rate when measuring your score, no matter what your credit limits or availability may be. In most cases, a good credit ratio is below 30%.

More payment history, better track record

Effect on score: Payment history
When you imagine a credit bureau giving you a score, you can liken it to a jury deciding on a verdict. The most important factor in any court case is evidence. As a jury member, you would like to see as much evidence as possible when choosing a verdict. Just like a juror, a lender is going to want to see as much evidence of your payment history as possible when applying for a credit card. Consistent on-time payments are one of the fastest routes to pristine credit. A new credit card will result in more credit history, and as long as you pay your bills, this should be a boon to your score.

Better credit mix/diversity

Effect on score: Credit mix/diversity
Taking on another credit card account when you have only credit cards in your credit mix is negative. That being said, if you don’t have any credit cards or other credit card accounts in your credit mix, it can be a plus. Again, different types of debt and credit will have different terms. If all you have is a mortgage and student loans, you need to seriously consider diversifying your credit mix.

Make sure you get the right card

Regardless of the short-term pain inflicted by credit card usage, you also want to avoid credit cards that could cause you long-term pain. Mario Hernandez, a certified financial planner at Sage Point Financial, says this is of utmost importance. “In general, I advise clients not to do promotional credit card offers that offer 0% for a certain period of time because, in most cases, clients are not diligent enough to pay off the charged amount off before the promotional period expires. Once that ends, they get hit with a very high-interest rate.”
Hernandez goes on to say, “I recommend that clients instead look for offers that provide reasonable interest rates where they are able to lock in the period to pay off the balance.”
Remember, your credit score should be protected at all costs. Making the right decisions with credit cards is one step in the right direction toward good credit and excellent personal financial habits. You can use our comparison tool to find a personal credit card with a low interest rate and other helpful features.

SuperMoney may receive compensation from some or all of the companies featured, and the order of results are influenced by advertising bids, with exception for mortgage and home lending related products. Learn more

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How much does your credit score go down when you apply for a credit card?

There is no set mathematical formula, such as if you apply for X credit card, your credit score goes down by Y. But a single hard inquiry could lower your score by 5-10 points. Credit bureaus will use a number of factors that all influence each other when giving you a credit score, so multiple inquiries could lower your score more.

Is it bad to apply for a credit card and not use it?

No, in fact, it can have a positive effect in the long term. You will be able to both lower your credit utilization ratio as well as have another account with a neutral track record because you have never used it. This also adds to your payment history. However, there can be unintended consequences, such as a bank or credit card company canceling your card without your knowing about it. Be sure to pay close attention should you obtain a new credit card with the idea of never using it.

How many credit cards can you have before it hurts your credit?

You can have as many credit cards as you want. The trick is to pay them off and keep track of them. In fact, it’s better to have too many credit lines that are kept in order than too few.

Is it better not to have a credit card?

If you are the type that likes to rack up $20,000 on a night out and regret it the next day, then yes, it is better not to have it. If this isn’t the case, then credit cards are a great way to build credit and improve your score over the medium/long term. Again, credit cards should just be one portion of your overall credit portfolio. The better the credit mix you have, the better your credit score should be.

Key takeaways

  • Applying for a new credit card affects your credit, but the results can be mixed.
  • In the short term, applying for a new credit card can have a negative impact due to a hard inquiry and a drop in the age/length of your credit history.
  • In the long term, applying and utilizing an additional credit card can help your score if managed properly. Lowering your credit utilization ratio and providing more evidence through your transaction and payment history can be huge boons to your score.
  • Credit cards are just one part of building a credit score and a credit file. They should be used in conjunction with other forms of building credit.

SuperMoney may receive compensation from some or all of the companies featured, and the order of results are influenced by advertising bids, with exception for mortgage and home lending related products. Learn more

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